The outlook for milk production remains subdued despite strong farm gate prices, reported Patty Clayton, Lead Analyst for Dairy at the UK’s Agriculture and Horticulture Development Board.
Latest forecasts for 2022 suggest 0.6% annual growth in milk supplies, equivalent to an additional 1.8bn litres of milk. This follows a low growth year in 2021, with estimated* milk production up by 0.9% for the year, wrote Clayton.
Although milk prices are currently strong, high input costs, labour shortages and increasing greening requirements are pushing profits downwards. Clayton said there’s no relief in sight in terms of inflation, at least for the first half of the year, leaving little incentive for farmers to push for higher milk yields.
If the weather is favourable come spring, supplies could rise slighting, but overall, Clayton said the outlook for feed, fertiliser and energy costs remains bullish. Labour challenges, shipping delays and environmental requirements will also play a role in determining supply, she added.
“The limited increase in milk supplies will continue to support current price levels, with some potential for further increases as demand continues to recover to its pre-pandemic levels,” she said. “There are, however, some risks of softer demand from further Covid outbreaks or reduced purchasing as buyers use up some of the security stocks held in response to delivery delays.”